SOLUTION MANUAL FOR FINANCIAL
ACCOUNTING 12TH EDITION TEST ACTUAL
QUESTIONS AND CORRECT ANSWERS
◉ Financial Users.
Answer: Internal and External
◉ Internal users.
Answer: Managers who plan, organize, and run a business
EX: Marketing managers, production Supervisors, finance directors,
and company officers
◉ External Users.
Answer: individuals and organizations outside a company who want
financial information about the company
◉ Ethics in Financial Reporting.
Answer: Sarbanes-Oxley Act (SOX) OF 2002 Requires
-Top management to certify accuracy of financial information
-sever penalties for fraudulent financial activity
-Increased independence of auditors
,-increased responsibility for board of directors
◉ GAAP (Generally Accepted Accounting Principles).
Answer: a set of accounting standards that is used in the preparation
of financial statements
◉ 2 primary principles.
Answer: Relevance and Faithful Representation
◉ Historical Cost Principle.
Answer: An accounting principle that states that companies should
record assets at their original cost.
Ex: machinery, land
◉ Fair Value Principle.
Answer: An accounting principle stating that assets and liabilities
should be reported at fair value (the price received to sell an asset or
settle a liability).
Ex: stocks
◉ Monetary Unit Assumption.
, Answer: An assumption that requires that only those things that can
be expressed in money are included in the accounting records.
◉ Economic Enity Assumption.
Answer: Requires activites of an entity be kept separate and distinct
from the activities of its owner and all other economic entities
◉ Forms of Business Ownership.
Answer: proprietorship, partnership, corporation
◉ Accounting Equation.
Answer: Assets = Liabilities + Stockholders' Equity
◉ Asset.
Answer: Anything of value that is owned
◉ Liabilities.
Answer: Amounts owed to creditors or obligations
◉ Stockholders' Equity.
Answer: Ownership on corporation's total assets
ACCOUNTING 12TH EDITION TEST ACTUAL
QUESTIONS AND CORRECT ANSWERS
◉ Financial Users.
Answer: Internal and External
◉ Internal users.
Answer: Managers who plan, organize, and run a business
EX: Marketing managers, production Supervisors, finance directors,
and company officers
◉ External Users.
Answer: individuals and organizations outside a company who want
financial information about the company
◉ Ethics in Financial Reporting.
Answer: Sarbanes-Oxley Act (SOX) OF 2002 Requires
-Top management to certify accuracy of financial information
-sever penalties for fraudulent financial activity
-Increased independence of auditors
,-increased responsibility for board of directors
◉ GAAP (Generally Accepted Accounting Principles).
Answer: a set of accounting standards that is used in the preparation
of financial statements
◉ 2 primary principles.
Answer: Relevance and Faithful Representation
◉ Historical Cost Principle.
Answer: An accounting principle that states that companies should
record assets at their original cost.
Ex: machinery, land
◉ Fair Value Principle.
Answer: An accounting principle stating that assets and liabilities
should be reported at fair value (the price received to sell an asset or
settle a liability).
Ex: stocks
◉ Monetary Unit Assumption.
, Answer: An assumption that requires that only those things that can
be expressed in money are included in the accounting records.
◉ Economic Enity Assumption.
Answer: Requires activites of an entity be kept separate and distinct
from the activities of its owner and all other economic entities
◉ Forms of Business Ownership.
Answer: proprietorship, partnership, corporation
◉ Accounting Equation.
Answer: Assets = Liabilities + Stockholders' Equity
◉ Asset.
Answer: Anything of value that is owned
◉ Liabilities.
Answer: Amounts owed to creditors or obligations
◉ Stockholders' Equity.
Answer: Ownership on corporation's total assets
